Legislative Update: Some Wins, Some Hills Yet to Climb

Stay calm, and remain focused: That’s good advice for print services providers as they confront legislation on Capitol Hill, proposed postal reform and regulatory trends that will impact their businesses in 2019.

According to The Economist, 2019 shows all signs of being “another exceptionally discordant year” for American politics. The magazine’s annual survey and forecast, “The World in 2019,” warns that the national mood “is more divided, febrile and angry than at any point since at least the late 1960s.”

Time will tell. The printing industry, thankfully, won’t be roiled by emotions like these as it confronts legal and regulatory issues that play no small part in determining how profitable it will be and how efficiently it will be able to operate in the new year ahead. But the fact that the industry’s legislative priorities are relatively low-key doesn’t make them any less urgent to pursue.

Conversations with government watchers and other experts from the industry’s leading trade associations identify five main areas of focus for print services providers (PSPs):

the impact of tax reform;

tariffs and trade issues;

efforts to financially stabilize the U.S. Postal Service;

environmental, health and safety regulations at the federal and state levels; and

support for job training and career development programs.

Nudging these trends in directions favorable to the industry will be the goal of the trade groups’ lobbying and advocacy campaigns in 2019.

Impact of Tax Cuts and Jobs Act

No legislation taking effect last year had greater implications for the industry than H.R.1, the Tax Cuts and Jobs Act, signed into law on Dec. 22, 2017. One year later, the associations agree that the measure has mostly succeeded in delivering the economic benefit they hoped it would.

The cuts it brought “have sped up the economy fairly significantly,” Dr. Ronnie H. Davis, senior VP and chief economist at Printing Industries of America (PIA), points out. He credits its effects with contributing the equivalent of a half a percent of GDP to the economy as a whole, enabling it to grow by about 3% in 2018.

This indicates that H.R.1 “has achieved its purpose, and that has helped print,” Davis notes. Thanks to the “new life” the tax cuts injected into the economy and now finds itself in the mature phase of the longest recovery on record.

Marci Kinter, VP for government & business information, Specialty Graphic Imaging Association (SGIA), says the “overarching optimism” she has sensed in the industry since last year “reflects the implementation of the Tax Cuts and Jobs Act.” Exactly how much advantage PSPs are taking of its tax-saving opportunities can be hard to gauge. But Kinter says that, based on what she is hearing from her members, “it is a very positive step forward.”

Anticipated to be one of the bill’s most stimulative features was its full and immediate expensing provision, which permits companies that buy machinery and software to deduct the full amount of the investment from their taxes in the year in which the purchase is made. H.R.1 makes it available through 2022 for both new and used equipment.

“A great step forward in tax policy” is how Mark Nuzzaco, VP of government affairs at APTech the Association for Print Technologies (formerly NPES), sums up the provision. He says APTech is beginning to see indications that it is driving investment in graphic equipment. PIA’s Davis, likewise, sees informal evidence that it “gave a bump to printing investment” by making labor-saving machinery easier to acquire.

Nuzzaco says APTech will advocate that the expensing provision be made permanent, although he thinks that an immediate change could be challenging to achieve during the incoming session of Congress. For now, APTech will concentrate on reminding PSPs and OEMs alike that the opportunity exists and that the time to act on it is limited.

Industry Caught Up in Tariff Disputes

As everyone invested in the stock market knows, anxieties over international trade rivalries and tariffs were a big reason for the steep drop in value toward the end of 2018. Lisbeth Lyons, PIA’s VP, government affairs, contends that through its dependence on imported newsprint and aluminum, the printing industry finds itself caught up in trade-related crosscurrents that “can change on a Tweet” from the Trump White House.

“The printing industry has been dragged into this trade negotiation strategy,” even though newsprint is a different issue from the kinds of tariff protection the Trump administration is pursuing, according to Lyons. The fact that as many PIA members support these policies as oppose them is “reflective of the country,” she says.

Nuzzaco outlines three categories of tariffs affecting the printing industry: anti-dumping and countervailing duties imposed by the Trump administration on uncoated groundwood imported from Canada; tariffs on imported aluminum and steel; and a series of duties on Chinese-made machinery, some of which has included printing equipment. He points out that in all cases, the exporters aren’t the ones paying the penalties; the cost burden falls on the end-users of the imported goods.

The industry achieved what Lyons calls “an unusual success” on one of these fronts last year when the U.S. International Trade Commission rescinded the Canadian newsprint tariffs, ruling that American paper producers were not being hurt by the imports. Nuzzaco says that this came about largely as a result of a “very major effort” by the STOPP (Stop Tariffs on Printers & Publishers) Coalition, a broadly based anti-tariff initiative whose supporters include APTech, PIA and several other industry associations.

The two groups also stand behind efforts to roll back tariffs of 10% on aluminum for printing plates and 25% on steel for printing machinery. In particular, they support requests for exclusions by Agfa, Fujifilm, Kodak and Southern Lithoplate — the leading suppliers of plates to the U.S. market. All announced pass-along plate price increases last year.

APTech and PIA contend that an exclusion for one should be considered an exclusion for all on behalf of the industry, which is being unduly burdened by the added cost of the plate metal. According to Nuzzaco, Department of Commerce data shows “unevenness” in the way exclusion requests have been processed.

Fortunately, he adds, since late December, some exclusion requests supported by APTech and PIA have been granted. “Hopefully, this portends swift action on the remaining requests.” Nuzacco says. “The associations will continue to urge swift approval.” In a parallel case, APTech is vigorously urging the Office of the U.S. Trade Representative to implement an exclusion process for tariffs affecting printing technologies imported from China.

In similar need of swift remedial action is the U.S. Postal Service, whose pain is shared by the mailing industry that relies upon it for unimpeded delivery.

U.S. Postal Service Woes Continue

The USPS “still lacks sufficient income to meet the obligations imposed on it by Congress,” observes Leo Raymond, managing director of MailersHub, an online community for commercial mailers.

No longer able to count on the same income it used to derive from its “monopoly product” — First-Class mail — the USPS is seeing the number of places it must deliver to increase, even as its deliverable volume goes down, Raymond says. The Postal Service also remains obligated to prefund health care premiums for its retirees, a requirement that, when combined with declines in revenue, causes the system to operate with multibillion-dollar deficits every year.

The result, in Raymond’s view, is a postal system that is “not dead, but not any healthier” than its structural problems permit. A Postal Service reform bill introduced in 2017 aimed to save the USPS $10 billion over 10 years, but it lost key sponsorship and failed to advance. Another attempt was made last year in the form of the 2018 Postal Service Reform Act (S. 2629), which would solve the prefunding problem by requiring postal retirees to enroll in Medicare as their primary care provider.

The current session of Congress will have to take up this idea and related proposals all over again, but Lyons is optimistic that postal reform will get the serious consideration it deserves. She notes that although no single piece of legislation can solve all problems, achieving short-term financial stability by eliminating the prefunding liability would at least take the pressure off calls for rate increases as the solution to the Postal Service’s financial woes. “We continue to make that pitch,” Lyons says.

Commercial mailers don’t need to be reminded of the postage rate increases scheduled to take effect on January 27 of this year. The increases, says Raymond, are based on an inflation cap as per the 2006 law that tied postage rate hikes to the rate of inflation, and thus are in line with what the mailing industry would have expected. But, he advises that there could be “discomfort” in some categories as differences between presort discounts and basic rates shrink.

Still another concern for mailers, according to Raymond, is last year’s decision by the Supreme Court that states are entitled to collect tax on sales that occur within their borders, even when the seller does not maintain a nexus — a physical presence — in the state. Many states have not yet updated their procedures for assessing and collecting sales tax on goods mailed or shipped into their jurisdictions from outside e-commerce sources. Raymond says there is “no certainty” at this point as to what steps they will take, or when.

Common Sense Environmental Regulations

There’s somewhat more clarity when it comes to environmental rules and other kinds of regulations affecting PSPs. At SGIA, Kinter’s general take on trends in environmental oversight is that “we’re seeing positive steps forward that will mean, if not regulatory relief, at least regulatory guidance and a little bit more common sense.”

She says an example is a decision by the federal Environmental Protection Administration (EPA) to do away with its “once in, always in” policy of making companies deemed to be major sources of air pollutants perpetually subject to strict record-keeping and reporting requirements.

With the change, which Kinter calls a “huge win” that SGIA has been working toward since 2006, a company can return to status quo ante after demonstrating it has reduced emissions below the major-source threshold. “You want to have a carrot at the end of the process,” she explains.

Kinter observes that while the Trump administration is making good on its pledge to avoid new regulations, enforcement of existing ones hasn’t abated.

The Occupational Safety and Health Administration (OSHA), for example, continues to crack down on machine-related amputation hazards, and SGIA recently published a list of the top 10 violations for which OSHA most frequently cited printing companies in 2018. The states, meanwhile, are coming up with their own rules for managing industrial materials, such as cleaning solvents.

As always, California leads the nation in rulemaking for workplace safety and consumer protection. Other states, Kinter says, could take California’s requirements for preventing on-the-job heat stress and its proposed regulations for curbing workplace violence as models for their own programs.

She notes that while SGIA isn’t opposed to measures like these, the association wants to ensure that if and when they are mandated, they are framed in a way that will be practical for small businesses to implement.

Warnings for Hazardous Chemicals

This is the principal concern with California’s Proposition 65, officially known as the Safe Drinking Water and Toxic Enforcement Act since its passage in 1986. Under this rule, Kinter says, makers of products sold in California must disclose the presence of chemicals deemed harmful by the law (which requires the state to publish an annually updated list that now consists of more than 900 such substances).

If the amount present in the product exceeds the “safe harbor” limit set for the chemical, the product has to carry a warning label that identifies it: for example, cadmium in a coffee cup, either as a component of the cup itself or as an ingredient of the ink used to decorate it.

“That’s a lot to put on a small business,” Kinter says, noting that SGIA members producing mugs, T-shirts and other consumer items are among those potentially subject to Proposition 65’s disclosure requirements.

As a member of the Coalition for Accurate Labels (CAPL), SGIA wants to see realistic, science-based standards for communicating product information to consumers. If California’s approach becomes more broadly adopted, Kinter adds, SGIA members and other PSPs need to be sure “there’s some science behind it, and some conformity.”

Help for Our Skilled Labor Shortage?

Workforce development, an issue of ever-increasing concern to the printing industry, has a higher than usual profile on the national stage thanks to President Trump’s creation of the National Council for the American Worker, which will address the “skills crisis” that has caused 6.7 million jobs to go unfilled. Large employers, including Walmart, Home Depot, General Motors and Microsoft, have pledged to support the initiative with job training programs and hiring.

Closer to the needs of employing printers is the federal Strengthening Career and Technical Education for the 21st Century Act (H.R. 2353), which went into effect on July 1, 2018. Reauthorizing an earlier law that provides grants to community colleges and other post-secondary institutions, the act funds career and technical education (CTE) programs in 50 states and U.S. territories. It also ensures that the programs are academically rigorous and relevant to the demands of the job market.

As Melissa Jones, president of the Graphic Arts Association (GAA), can attest, some of that funding has found its way to schools offering print-related training — where it is making a difference.

“Our industry is currently perceived by students as one that does not hold promising, lucrative career opportunities, and nothing could be further from the truth,” she declares.

“The Graphic Arts Association has been working diligently with Pennsylvania, New Jersey and Delaware schools for many years regarding program support and development. Now, with the additional funding, dynamics and general support that H.R. 2353 provides, GAA will be able to assist local schools on a wider scale in the creation of a fresh pipeline of qualified, exceptional talent as well as a sincere appreciation for the print industry overall, for many generations to come.”

Joseph Lyman, president of the Great Lakes Graphics Association (GLGA), agrees that, “the need to recruit and educate young adults is paramount to the print industry’s future success.”

“The Strengthening Career and Technical Education for the 21st Century Act will help prepare students with the skills necessary to secure and succeed at great-paying industry jobs,” he says.

With no shortage of legislative and regulatory challenges ahead of them in 2019, industry associations are taking care to focus their efforts where they will do the most good.

For APTech, says Nuzzaco, opposing tariffs will be among the top priorities. To that end, the association has aligned itself with Americans for Free Trade, which he describes as “a large coalition of like-minded industries to object to tariffs in general.” Also high on APTech’s agenda will be supporting postal reform and monitoring other developments that could affect the printing industry.

Kinter admits that given the sheer size of the task of advocating on behalf of an industry, “the big wins don’t seem very big at times.” But she insists that SGIA will keep pushing its agenda forward, working with partners to ensure printing is recognized as a viable manufacturing sector that is important to the economy as a whole.

This is also the goal of Print Powers America, a lobbying and grassroots initiative launched last year by PIA. Lyons says it works by taking part in coalition activities that benefit the industry, such as the newsprint tariff rollback in conjunction with STOPP. Print Powers America also supports the Coalition for Paper Options, which upholds the right of Americans to receive paper-based communications.

The industry came to Capitol Hill in force and with one voice at the 2018 Print & Packaging Legislative Summit, which PIA co-hosted with SGIA, APTech and three other printing trade groups. The event was, according to Lyons, “a really powerful display of every different type of printing” that gave lawmakers a true sense of the industry’s economic footprint.

Nevertheless, there’s still “a lot of exciting issue education to be done” in 2019, particularly in the cases of the 90 new members joining Congress in the current session. Lyons thinks they’ll be receptive to the instruction.

After all, she points out, “every one of them used a printer to get elected.”